INSIDE COMMERCIAL REAL ESTATE
Business landlords foresee higher rents
Lower vacancy rates could drive up demand, prices
SUSAN DIESENHOUSE
March 28, 2007
As tenants lease more office space in Chicago's Central Business District, they
are pushing down the vacancy rate, allowing landlords to reduce concessions and
plan on raising rents in the near future, after years of flat or declining
rates.
"The CBD is improving," said David Burden, senior managing director
at Cushman & Wakefield of Illinois Inc. "While there are still some
favorable deals for tenants, landlords are optimistic that they'll be able to
raise rents in the next few years."
During the first quarter of the year, the overall CBD vacancy rate fell to 15.5
percent from 18.2 percent a year earlier. A market is considered to have a
healthy balance of supply and demand when about 10 percent of available space
is vacant.
The average asking rent was $28.16 a square foot,
compared with $27.90 a year ago and a peak of $29.67 in 2002, according to Cushman
& Wakefield's market survey.
In the
As usual, the best performing submarket is Class A space, which has an overall
vacancy rate of 12.8 percent and an average asking rent of $33.30 a square
foot.
Now under construction are 3.1 million square feet of office space, up from
477,000 square feet a year ago.
The tightening of the office market reflects tenants' flight to higher-quality
space more than strong economic expansion, Burden said.
"There's some job growth, but not as much as the late 1990s," he
said. "The bigger trend is tenants improving the location and quality of
their offices."
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sdiesenhouse@tribune.com
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